OPEC and Russia Aim to Raise Oil Prices With Supply Cut

The presence of Mr. Novak, who is subject to U.S. sanctions, could come as an embarrassment to officials in Europe when their citizens face what could be a tough winter because of higher energy prices linked to Russia’s war in Ukraine.

The production cut by OPEC Plus marks a major turnabout in the approach of the 23-member group. After a deep output cut in the early days of the pandemic, the group gradually restored production over the next two years. Recently, though, Prince Abdulaziz, who chairs OPEC Plus with Mr. Novak, began to shift the group’s direction as prices came under pressure.

Last month, the group signaled concerns about the markets with a nominal cut of 100,000 barrels a day. When markets shrugged off that move and oil prices slipped below $80 a barrel for West Texas Intermediate, the American benchmark, the Saudis appear to have decided that a much bolder signal was required.

Analysts said that the increasing intervention in the markets by Washington and the European Union, such as the move to set a price cap for Russian oil, may be pushing OPEC Plus into more aggressive moves. Russia wants a higher price to offset the steep discounts it has had to give to sell its oil.

Some oil producers may see the price cap as a precedent that “might be an attempt to drive down prices more generally,” said Richard Bronze, the head of geopolitics at Energy Aspects, a research firm. Such worries may explain why OPEC Plus “is willing to take such a big step and one that will be so unpopular in Washington,” he added.

At the news conference, Prince Abdulaziz denied any collusion with Russia, portraying OPEC Plus as a “band of brothers” interested only in preserving the stability of markets. “Where is the act of belligerence?” he asked.

At one point he instructed an assistant to display a chart showing that crude oil has only edged up in price by a single-digit percentage since January, before Russia invaded Ukraine, while the prices of other energy sources like natural gas in Europe and coal have soared.

Article source: https://www.nytimes.com/2022/10/05/business/opec-russia-oil-output.html